Real estate companies are increasingly embedding ESG (Environmental, Social, and Governance) considerations into every stage of a hotel investment lifecycle, from due diligence to acquisitions and from leasing to asset management, and subsequent exit strategy.
Similarly, the opportunity to report and disclose ESG performance attributes of individual assets, portfolios and institutions is increasing, with regulatory disclosure requirements also rising. Several reporting frameworks are widely used, such as the TCFD (the Task Force on Climate Related Financial Disclosures) and GRESB, a benchmark for ESG performance in real estate.
As ESG considerations become more integral to investment lifecycle decisions, real estate companies in the hotel sector are increasingly turning to internationally recognised certification to demonstrate credible engagement with ESG factors for the design and performance of individual assets and portfolios. These are certifications or labels awarded to properties that meet specific environmental performance criteria related to energy efficiency, water conservation, materials usage, and overall environmental impact.
Certification for the asset performance can mitigate risks associated with changing environmental regulations and increasing awareness of sustainability issues. Investors with certified sustainable properties are better positioned to navigate evolving market dynamics and meet the expectations of stakeholders.
Asset-level certifications covering a broad range of ESG factors for the built environment are in wide use. These include, but are not limited to:
Certain single-issue certifications are also available, such as WELL and Fitwel, focused on health and well-being, as well as an increasing number of net zero carbon buildings standards developed by individual country members of the World Green Building Council.
Investors should ensure that certification is not limited only to the design of a building but extends also to an assessment of its actual performance, ensuring both design and operational performance are certified by the relevant entities.
Likewise, certifications exist to validate authentic ESG achievements in the management and operation of hotel real estate. All are practical strategic frameworks and provide certification to hotels that meet rigorous environmental, sustainability and social impact standards. Notable hotel sector certifications that are recognized internationally include, but are not limited to:
Additionally, whilst not a certification process, the Sustainable Hospitality Alliance has recently launched the Pathway to Net Positive Hospitality which promotes environmental and social responsibility within the industry. It focuses on minimizing negative impacts, conserving resources, and fostering positive contributions to local communities. This aims to create a regenerative impact, where the hospitality sector not only reduces its footprint but actively enhances the well-being of the environment and society. It provides a framework for responsible business practices, reduces operational costs through efficiency measures, and helps a hotel play a proactive role in creating positive social and environmental impacts.
Ultimately, gaining certification for the asset performance and management and operational accomplishment of individual assets and portfolios offers a competitive edge, cost savings, and risk management benefits for hotel sector real estate companies, whilst contributing to global sustainability goals.
Choosing the most appropriate certification involves considering the project's sustainability objectives, regional relevance, and operational requirements.
Thank you to our ESG Expert, Simon Catterick at Mission Net Zero, for sharing his knowledge in writing this article.
